SYNOPSIS ON ECONOMY OF PUNJAB

1. BACKGROUND OF ECONOMY OF PUNJAB

 The state of Punjab spread over an area of 50362 sq. km is regarded as the best state in all
aspects as it offers the best quality of life. As per state hunger Index of India, Punjab has
the lowest level of hunger in India. The state has a very rich fertility on earth. It is an
ideal place of growth of wheat, rice, sugar, cotton, vegetable and fruits etc. it is known as
“India’s bread basket”. The post Green Revolution , Punjab earned the distinction of
being the “Granary of India” The state was awarded with national productivity award
for extension of services of agriculture for 10 years from 1991-92 to 1998-99 as well as
from 2001-04.

 On Economic front Punjab is ranked 4th in terms of per capita income.

 The key sectors of economy of Punjab are primary sector which includes agriculture, live
stock, fishing, forestry etc. The secondary sectors comprises manufacturing electricity
and gas water supply construction. The tertiary sectors includes trade, hotels, transport,
storage, real estate, banking and insurance etc.

 The major sector of Punjab Economy i.e. Agriculture, wherein more than 40% of the
population of the state occupies itself with agriculture contributing to a major segment of
gross domestic product of the state. It has a significant portion of food grain production in
India contributing a prominent rice and wheat stock kept by Central pool. The state is
ranked to be one of the most irrigated region.

 The state has an agrarian economy having a lower Industrial output comparatively with
other states of the country. The Industries in Punjab is mainly categorized into Agro
based Industrial units, Chemical units, machinery units.

2. STRENGTHS OF PUNJAB ECONOMY

The state is known for the enterprising spirit and toil of its people who have transformed
every potential opportunity into success story .Besides the dynamism of its people .
Punjab is the land of rivers, fertile soil and steady environment. Because of these
strengths Punjab besides earning the Granary of India has done remarkably well in
sectors across the spectrum such as industry, Health, Education, Sports, Arts, Literature
and Culture
 The state has been contributing 50%-60% of wheat and 35%-40% of rice procured by
Govt of India for food security of the country for the last four decades

 The state produces about 70% of best cotton quality in the country however the Spindlage
capacity is only 1.5%.

 The state has a top rank in India as per the availability of milk after Haryana and Gujrat.
  On the infrastructure front, it is among leading states in India. It boasts of highest road
density of India (105 km of surfaced road per 100 sq km) as against only 43 for India.
The state consists of one of the best developed network of roads in India, which are
weather paved and extend to majority of the villages, the state is crossed by several no. of
National Highways. It has a well developed railway stations served by Northern Railway.
It has a rail network of 3726 km. On power front it has installed power capacity of 4376
MW.

 On industrial front no. of large and medium scale industrial units is appx. 500 with a
fixed investment of Rs. 67500/- which has generated employment to 2.80 lacs persons
with a turn over of Rs. 130500/- crores. The small scale industries are 161400 with a
fixed investment of Rs. 15700/- crore providing employment to 11.48 lacs persons.

 The export performance of the state has also been commendable in the last few years
which is appx. Rs. 30000/- crores. The state has also established one stop clearance of the
proposals of new investments, for this it has established Punjab Bureau of Investment
Promotion (PBIP) and the proposals of Rs. 18150/- crores have been received from
various big corporates.

 The Punjab state has tackled poverty in more effective manner than any other state. It has
only 11.3% population living below poverty line as compared to 29.5% at national level.

 The state is famous for its culture, cuisine spirituality, ancient civilization and history.
The beautiful and royal palaces of Punjab, historic sites of battles, temples, shrines and
Sikh architecture are the centers of tourist attraction.

3. WEAKNESSES OF PUNJAB ECONOMY

 However Punjab’s early success as a prosperous agricultural state has petered out. Its
overreliance on farming is now even seen as a parable of the challenges faced by India’s
unreformed and poorly governed states. Since 1980 the state has lost its economic
leadership among other states An over use of fertility, falling water tables have also
compounded agricultural woes.
 A major weakness has been a high fiscal deficit which is mainly out of huge unwarranted
subsidies, the chief culprit being free power to farmers.
 One consequence is that the govt is not even able topay all salaries on time which leads
demoralization among staff who look for avenues to make money illegaly
 Another reason include the agricultural plateau reached by green revolution , the failure
to diversify fast enough out of agriculture, the failure to make educational investments
necessary to induce a switch to service industries like computer software, very high land
pricesthat have discouraged industry .All this has translated into sluggish economic
growth, which has been well below the national average in past years.
4. ECONOMIC SURVEY

The economic survey study of the state has been based on the economic survey report of 2015-16
which has been prepared by the Economic and Statistical Organisation, Department of Planning.
It analyses the important economic activities and achievements of the Government during the
previous year. The information relates to various socio-economic sectors of economy along with
indicators and trends. The key highlights of the same are as under:-

2015-16 2014-15

GSDP at current prices (crores) 408815 368011

GSDP at 2011-12 (crores) 331940 313276
Per-capita income(Rs.) 126063 (10.04%) 114561 (8.96%)
Gross Receipts (crores) 46229 39023
Revenue Deficit (crores) 6394 7591
Fiscal Deficit (crores) 11895 10842
Public debt (% of GSDP) 30.45 30.53
Total Revenue Receipt 11.31 10.60
(% of GSDP)

 There has been a significant improvement in the size of annual plan of the state and its
implementation. Since 2006-07. The approved plan outlay during 2006-07 was Rs. 4000/-
crore which increased to 21174/- crore in 2015-16. The realization of the Eleventh five
year plan during 2007-12 was 81% which was 73% during 2013-14 and 75% during
2014-15 and 80% during 2015-16.

 The GSDP of the state for 2014-15 was Rs. 368011/- crores at current prices showing an
increase of 9.95% over 2013-14 and which was estimated for 2015-16 to Rs. 408815/-
crores showing an increase of 11.09%. The GSDP for 2014-15 is Rs. 313276/- crores (at
2011-12 prices) which is showing an increase of 4.92% over the estimates of 2013-14
which is expected to increase to Rs. 331940/- crores as per advance estimates in 2015-16
reflecting an increase of 5.96%

 The total contribution to central pool of wheat is 116.41 lacs ton (41.50%) for 2015-16
vis-à-vis 108.97 lacs ton (43.40%) for 2014-15 and rice is 77.86 lacs ton (24.20%) for
2015-16 vis-à-vis 81.06 lacs ton (25.50%) for 2014-15.

 The net irrigated area is 4094000 hectare in 2015-16 vis-à-vis 4141000 hectare in 2014-
15.

 The share of primary sectors which includes agriculture and live stock has come down
from 30.81% in 2011-12 to 27.22% in 2015-16. The share of secondary sectors decline
from 25.40% in 2011-12 to 23.88% in 2015-16. The share of territory sectors which
comprises of service sectors has increased from 43.79% in 2011-12 to 48.90%.
  The agriculture sectors in the state is showing signs of serious slow down over the past
few years the sector growth rate remained below 2% in all the years from 2009-10 with
growth turning negative in 2009-10, however is expected to record positive growth of
5.22% in 2015-16 as compared to negative growth of (-) 3.40% in 2014-15. The growth
in this sector is slowing down over the years as cropping industry and irrigation potential
has already been fully exploited and the growth in production has already reached a
saturation point as very few R & D advances have taken place over a long period of time.

 The receipt of revenue account which were a 39023 crore in 2014-15 rose to 46229 crore
in 2015-16 showing an increase of 18.47%. Out of the total receipt of revenue account,
tax and non tax revenue constitute a dominant proportion of the budget which is 72.9% in
2014-15 and 71.72% in 2015-16. Transfer of resources from centre in the form of state’s
share in central taxes and grants were 27.09% in 2014-15 and 28.28% during 15-16.
Expenditure on revenue account which was Rs. 46614 crore in 2014-15 rose to Rs. 52633
crore in 2015-16,thus showing an increase of 7.43%.

 The outstanding public debt of the state is continuously increasing since 2011-12. It was
Rs. 102234 crore as per 2013-14 which increased to 112366 crore as per 2014-15 and
further to 124471 in 2015-16.

 The wholesale price inflation averaged 2.05% during 2014-15 and 1.38% in 2015-16
similarly CPI average was 6.30% in 2014-15 and 5.65% in 2015-16.

Besides above the Punjab Govt. has been able to tackle the problem of poverty in more
effective manner than other states. As per the latest estimates the state has only 11.3%
population living below poverty line as compared to 29.5% at national level. In rural
Punjab the percentage of people living below poverty line is 7.4% which is 23.5% less in
percentage terms at national level.

5.

6. STATE DEVELOPMENT REPORT

The planning commission initiated in coordination with Punjab state the preparation of state
development report. The objective of which was to provide a quality reference document on the
development profile and setting out strategies for accelerating growth rate for the state. This
report highlights the critical resource gaps in the realization of sectoral perspectives and
articulate the desired policy directions which in turn set out a road map for accelerated growth
and intensified poverty reduction for the state in future . This report was prepared by members of
centre for research in rural and industrial development(CRRID)and headed by Dr.
venktasubramanian member planning commission.This SDR was released in 2002.

HIGHLIGHTS OF SDR
 The major natural resources of Punjab are land and water. Both have been over-exploited due
to intensive agriculture ,Most of the agricultural soils are nutritionally exhausted and have an
all time low level of organic carbon contents. Over the years the underground water level has
gone down by 10 to 15 metres in the central zone. Efficiency of canal irrigation is hardly 40
per cent as against the optimum of 60 per cent in the case of irrigation. More and more
cultivable areas are going out of cultivation due to water-logging and soil salinity, while
conservation efforts for reclaiming degraded soils and recharging underground water are
slow and inadequate.The scarce forest cover of Punjab lacks appropriate conservation efforts.

 Fiscal and Financial Management

Punjab economy decelerated during the 1990s, after recording the fastest growth in the
seventies and mid-nineties. Factors, which seem to have adversely affected the state’s
fiscal situation over the past 15 years are a high salaries and wage bill, mounting debt
burden, heavily subsidized social and economic services, slow growth of revenue and loss-
making PSUs. Public debt has been a convenient tool for raising resource and the state continues
to rely on borrowings to finance its deficit. The tax base in Punjab continues to be narrow and
tax compliance poor. The ratio of own tax percentage to GSDP has been consistently lower than
in the six fast growing states of the country .Relatively higher revenue expenditure, with lower
resources mobilization, indicates scope for improvement in the revenue deficit by improving the
tax ratio to GSDP.Punjab continues to rely heavily on raising funds through the expensive route
of small savings. With the reduction of interest rates there is a possibility of swapping expensive
loans with cheaper fundsThe state continues to forgo and dissipate scare resources by giving
concession and freebies amounting to Rs. 900 crore per year.

 FOCUS AREAS SUGGESTED BY SDR

 Development of agricultural and allied sectors
 Improving fiscal health
 Development of rural areas to improve quality of life of people
 Industrial development by modernization and technological upgradation
 Infrastructure development
 Power generation, transport
 Health and education
 Demographic development